The Second Circuit's Extraterritorial Application of the Commodity Exchange Act

Abstract

 In August 2019, the Second Circuit ruled in Prime International Trading, Ltd. v BP P.L.C. that plaintiffs bringing a private action under the Commodity Exchange Act (CEA) must plead a domestic transaction and domestic violative conduct. By requiring that plaintiffs plead domestic illegal conduct, Prime International’s holding will severely limit plaintiffs’ ability to seek damages in the United States, even when they trade entirely on U.S. markets. The high pleading bar imposed by Prime International is especially impactful given that trading commodities and futures contracts is more accessible than ever due to electronic platform-based trading, which allows traders to access U.S. and foreign markets with ease. 

This Note argues that Prime International improperly narrowed the domestic application of CEA section 22, which grants plaintiffs a private right of action. Instead, courts should adopt the “sufficiently domestic” analysis from Parkcentral Global Hub Ltd. v. Porsche Automobile Holdings. Under this suggested analysis, a plaintiff would need to allege that violative conduct impacted a domestic transaction to plead section 22. Additionally, the court would need to evaluate whether the claim is properly domestic or impermissibly foreign. Unlike the Prime International standard, domestic conduct would not be necessary—though it would likely satisfy the sufficiency analysis.